Reconciling your accounts – stopping susceptabilty to theft, fraud and errors

Your bank account is the heart of your business and your most liquid asset. It is also the account that is most susceptible to errors, theft, or fraud.

The other week, one of our clients paid a cheque to one of their suppliers, which bounced. This was unusual for them and being on holiday, they paid the supplier by BACS.

When it came to doing the bank reconciliation that month, we discovered the returned cheque had gone through the bank a few days later; therefore the client had paid twice. The cheque was for £2714.56.

Now most suppliers would be honest enough to return the money or off-set it against next month’s invoices but do you really want to be giving them that choice?

Another client had over £3500 taken by a rather well known gas / electricity supplier. An estimated read (for which no invoice came through). The money was taken from the account by direct debit. This may go unnoticed by a busy business owner if no invoice was sent, which could severely affect cash flow.

No accounting system has been invented that can prevent errors or fraud, but the reconciliation process of reviewing and checking the bank statement to the accounts reconciliation report each month is one of the best ways of finding errors — both innocent and intentional.

Reconciling the bank is fundamentally important to the security and accuracy of an accounting system. If done regularly, reconciling the bank account is a quick and easy task that reveals more about the state of your accounting system than any other single task performed.

Of course, reconciliations can be done annually, but is much harder later down the line to remember incidences which have occurred earlier during the year.

The best way to keep any accounting system is bang -up-to-date with fail-safes such as reconciliations to prevent financial ‘black-holes’.

Equation have just introduced the Fast-Track system which processes records, analyses and returns records to clients within 7-10 days.

For more information please visit: http://equationaccounting.wordpress.com/2009/06/07/fast-track-service-for-fast-moving-companies/